private sector – Just Transition Initiative

What is "Just Transition"?

Report/Case Study; Guidelines, Strategies and Recommendations

Jul 2021

From the grand to the granular: translating just transition ambitions into investor action

The report describes the current state of the just transition discourse amongst businesses and highlights, with the help of case studies, a just transition “Expectations framework” that can be used by businesses and investors to help with investment assessments and due diligence, shareholder engagement, as well as capital allocation decisions.

Geographic Scope
Sectors: General
Focus Areas: Government intervention > Other, Regulation; Investment > ESG and corporate engagement, Other, Private finance
Keywords: supply chain; CSR; co-creation; reporting; Task Force on Climate-related Financial Disclosures (TCFD); investors; private sector; OECD’s Guidelines for Multinational Enterprises; EU taxonomy; benchmarks; Climate Action 100+ (CA100+)
By: Nick Robins, Sabrina Muller, Katarzyna Szwarc
Publishing Organization: Grantham Research Institute on Climate Change and the Environment, Centre for Climate Change Economics and Policy, London School of Economics and Political Science
Academic/research institution or journal
Summary: The report describes the current state of the just transition discourse amongst businesses and proposes a path forward for businesses and investors to integrate just transition considerations into business decisions. The authors identify the just transition as a critical enabling factor in reaching net zero, noting how governments are increasingly recognizing that climate policies that do not take into account the effects on employment, communities, and consumers run the risk of failure. According to the authors, as the strategic case for just transitions has deepened, leading companies in the energy system have begun to formalize their responses as part of wider climate change strategies., Investors can also play a significant role by making sure that the social dimension is fully integrated into their assessment, stewardship, capital allocation, and policy activities.

The report presents a seven-point framework that combines the governance dimension for businesses (in terms of strategy, policy dialogue, and transparency) with a stakeholder component (including workers, communities, supply chains, and consumers). The intention is for this framework to be used in investment assessments and due diligence, shareholder engagement and stewardship, as well as the capital allocation decisions for portfolio companies. The framework is applied to analyze the work accomplished to date by five European international power utility firms.

The report identifies key lessons, including that businesses acknowledge some of the core foundations of just transitions, though the strategic approach is still emerging, with and that transparency and disclosure on just transitions is still lagging. It also points out how it is likely that investors will increasingly expect an active interest from companies to promote just transitions through public policy advocacy. Furthermore, supply chain realities loom large, in terms of generating quality green jobs for local people and also making sure that sustainability and human rights due diligence are intensified in international sourcing from developing countries. The authors highlight the need for community engagement to move from traditional corporate social responsibility activities to a more transformational model that is built upon co-creation. The report concludes with some critical next steps needed, including: promoting convergence around common approaches; modeling to help identify priority areas for investors; understanding better the role of participation and investor dialogues in just transition plans; along with clarifying the investor role in just transitions in emerging and developing economies.

Report/Case Study; Guidelines, Strategies and Recommendations

Dec 2018

Climate change and the just transition: A guide for investor action

This report applies a just transition lens to investor approaches, using illustrative examples to propose a framework that helps investors to place just transition principles at the center of their climate strategies.

Geographic Scope
Sectors: General
Focus Areas: Government intervention > Other, Regulation; Investment > ESG and corporate engagement, Other, Private finance
Keywords: investors; framework; fiduciary responsibility; financial risk management; private sector; capital allocation; Principles for Responsible Investment (PRI); Task Force on Climate-related Financial Disclosures (TCFD)
By: Nick Robins, Vonda Brunsting, David Wood
Publishing Organization: Grantham Research Institute on Climate Change and the Environment
Academic/research institution or journal
Summary: This report contends that investing in a just transition is set to be the best way to manage the strategic risks and opportunities flowing from the shift to a prosperous, low-carbon, resilient, and inclusive global economy. It highlights the influential role played by investors as the fiduciaries of assets and allocators of capital. The report also suggests how strategies for tackling the growing threat of climate change need to incorporate the full range of environmental, social, and governance (ESG) dimensions of responsible investment. This guide draws from an international review of investor approaches and dialogues with investors to provide a framework that can be applied both by individual institutions and through collaborative initiatives to help investors place just transition principles at the center of their climate strategies.

The article, using several examples of investor actions from around the world, highlights some strategic motivations for investors to pursue this work, including: broadening the understanding of systemic risks from climate change; updating the fiduciary responsibility to capture interrelated environmental and social drivers of long-term performance; recognizing the material drivers of long-term value; and identifying new growth opportunities in areas that combine climate and social goals. Based on these motivations, the article suggests five core areas of action for investors, including investment strategy, corporate engagement, capital allocation, and policy advocacy. The article also provides initial questions for investor engagements with companies on the just transition and highlights the need to build in a process to learn from the emerging experience and the lessons of practice, in terms of corporate engagement, capital allocation, and policy advocacy.

Academic paper/Case Study; Guidelines, Strategies and Recommendations

Mar 2020

Electrifying the ‘eighth continent’: exploring the role of climate finance and its impact on energy justice and equality in Madagascar’s planned energy transition

The study looks at Madagascar’s history of energy transition in the context of various financing instruments and actors as well as identifies the potential impacts on social equity.

Geographic Scope
Sectors: Energy
Focus Areas: Economic diversification/restructuring > Infrastructure investment; Government intervention > Public finance; Inequality and/or poverty > Other; Investment > Competitiveness, Private finance
Keywords: rural electrification; private sector; financial innovation; subsidies; electricity prices; stakeholder maps; direction of power; veto player; leapfrogging; stakeholder alliances
By: Tim Cholibois
Publishing Organization: Climate Change
Academic/research institution or journal
Summary: Through an analysis of projected energy finance flows and key financiers’ financing strategies, this paper shows a shift from grant-based climate finance to financial instruments with clear return profiles, such as concessional loans and private capital. It finds that the choice of financial instrument does impact the provision of complementary social services in rural electrification schemes. While grants are associated with higher investments in complementary social services, private financiers are focused on innovation and scale. Electrification projects that are financed purely privately were found to negatively impact social cohesion by increasing the inequality in access to energy.

The authors identify that apart from the financing gap of USD13 billion identified in the national plan as the main roadblock to successful implementation, there exist a whole set of interrelated, mutually reinforcing barriers to successful electrification, such as low institutional capacity, a lack of human capital and technical knowledge, corruption, and a dysfunctional utility. The authors use stakeholder maps and case studies from three rural electrification projects as part of the analysis.

The study concludes that, if only commercially viable energy projects were to be financed going forward, up to 19 million Madagascans might be excluded from future electrification efforts. Thus the paper recommends the need to promote climate finance literacy and the use of multiple electrification pathways. The author provides some examples, such as “grid extensions” through concessional loans, “scalable innovation” using private capital and risk guarantees, or grant-based “social mission” programs. The author suggests that the findings are relevant not only to Madagascar, but to most, if not all, least-developed countries (LDCs) aiming to decarbonize their economies.

Report/Case Study; Guidelines, Strategies and Recommendations

Aug 2020

Insights from historical cases of transition: Background paper for the EBRD just transition initiative

The report suggests a series of considerations for the European Bank for Reconstruction and Development (EBRD) to allow for the integration of just transition considerations into its decarbonization operations, using historical evidence from other deep structural changes.

Geographic Scope
Sectors: General; Mining
Focus Areas: Economic diversification/restructuring > Economic development plans, Other; Employment > Job creation and/or equality, Skills; Environment and/or pollution; Social and/or cultural impacts > Pride or cultural identity
Keywords: International Finance Institutions (IFIs); multilateral development banks; regional economic development; worker training; special economic zone; managed retreat; environmental rehabilitation; environmental remediation; “Bottom-up” approaches; labor policy; private sector; trade unions
By: Aaron Atteridge, Isabel Blanco, Claudia Strambo
Publishing Organization: European Bank for Reconstruction and Development (EBRD)
Development finance institution
Summary: The authors seek to offer insights into how transitions impact people, economies, and the environment, as well as the extent of the effectiveness of different kinds of responses including the impacts of not responding. Moreover, it provides useful considerations related to the needs of those who lose out in society, while addressing overall concerns about inequalities in societies affected by deep structural changes. The report was used to inform EBRD’s approach to just transitions, as set out in the document “The EBRD Just Transition Initiative”.

The authors highlight that without measures to promote a “just” transition, resistance will likely undermine its pace. They draw inferences from other deep structural transitions, such as the steel industries in the United Kingdom (U.K.) and Newcastle, Australia, as well as the gold industry in Free State Province, South Africa, to offer insights into what to expect from a green transition.

The authors suggest a series of considerations for EBRD’s operational response to a just transition in order to create viable short-term and long-term solutions for local populations who are affected. Notably, they point out the need for strategic planning for impacted communities, governance structures, and state capacity to implement just transition actions, along with a holistic approach to regional economic development.

Report/Policy Tools or Evaluations

Dec 2018

Enabling a just transition to a low-carbon economy in the energy sector: Progress and lessons in Emerging Markets

The report looks at the scope of just transitions in the energy sector in emerging markets, specifically Brazil, Russia, India, China, and South Africa (BRICS) as well as the Next 11 countries, through a simplified framework.

Geographic Scope
Sectors: Energy
Focus Areas: Employment > Job creation and/or equality, Other, Social protections; Government intervention > Regulation
Keywords: BRICS; Next 11 Countries (N11); emerging markets; state owned enterprises (SOE); business; private sector; indicators
By: Leah Worrall, Leo Roberts, Shelagh Whitley
Publishing Organization: HSBC Centre of Sustainable Finance
Private sector
Summary: The report takes a broad look at the enabling environment for just transitions in the energy sector in BRICS and the Next 11 countries through a framework that considers the macroeconomic and energy sector conditions, employment policies, and social structures in these countries.

The report finds that employment policies that exist across the countries, while key to economic growth, are often disconnected from the energy transition and wider macroeconomic planning. While the authors briefly map out the stakeholder base involved in just transitions in the energy sector, the report focuses on the role played by the government, businesses, and workers. The report posits the key role that state-owned enterprises (SEOs) have to play in enabling a just transition and identifies the absence of engagement platforms as a hindrance to effective dialogue.

The report applies a framework that uses transition indicators to broadly illustrate each country’s level of readiness for a just transition. However, the effectiveness of the indicators in representing procedural justice and inclusion issues will have to be assessed further.

Report/Guidelines, Strategies and Recommendations

Jun 2020

The EBRD Just Transition Initiative: Sharing the Benefits of a Green Economy Transition and Protecting Vulnerable Countries, Regions and People from Falling behind

This paper sets out the aims, rationale, and broad approach to implementation of the European Bank for Reconstruction and Development’s just transition initiative.

Geographic Scope
Sectors: General
Focus Areas: Economic diversification/restructuring > Economic development plans, Industry and/or sector assistance or plans, Infrastructure investment; Employment > Job creation and/or equality, Skills, Social protections; Environment and/or pollution > Nature; Inequality and/or poverty > Other; Investment > Competitiveness, Private finance, Stranded assets; Social and/or cultural impacts > Non-financial loss, Pride or cultural identity
Keywords: social inclusion; infrastructure investment; climate policy; private sector; coal assets; strategic and regional planning; coronavirus; environmental reclamation; green economy; just transition diagnostic; environmental legacies
Publishing Organization: European Bank for Reconstruction and Development (EBRD)
Development finance institution
Summary: This paper examines how the European Bank for Reconstruction and Development (EBRD) will support progress in the economies where it invests. The paper outlines the aims, rationale, and broad approach to implementation of the EBRD’s just transition initiative, which aims to help the bank’s regions share the benefits of a green economic transition and to protect vulnerable countries, regions, and people from falling behind. The initiative builds on the EBRD’s experience of fostering transition toward sustainable, well-functioning market economies and focuses on the link between the green economy and economic inclusion. Working with national and regional authorities, EBRD clients, and other partners, the initiative emphasizes policy and commercial financing interventions that support a green transition while also assisting workers (particularly those whose livelihoods are linked to fossil fuels) in accessing new opportunities.

The paper includes an overview of the EBRD’s emerging just transition diagnostic and metrics for screening investments. This approach helps the bank screen certain regions and industries for vulnerabilities, assess the potential for various investments to advance just transition objectives and the bank’s core goals, and develop a set of policies and investment activities. This framework is especially useful in demonstrating how development finance institutions can link individual investments with broader regional plans, including in place-based investment.